Quick Facts

Samoa’s economic freedom score is 61.9, making its economy the 78th freest in the 2015 Index. Its score has increased by 0.8 point since last year, with considerable gains in monetary freedom and the management of government spending outweighing a decline in labor freedom. Samoa is ranked 14th out of 42 countries in the Asia–Pacific region, and its overall score is above the world and regional averages.

Samoa’s efforts to expand its manufacturing sector, open the economy to global investment and financial flows, and encourage tourism correspond to an improvement in its economic freedom, which has risen by 1.3 points over the past five years. Gains in five of the 10 economic freedoms have been led by a 25-point improvement in investment freedom. Following a short drop into the “mostly unfree” category in 2013, Samoa has firmly re-established itself as “moderately free.”

Nevertheless, key structural and institutional problems persist. Despite a common-law legal system, the property rights regime is poorly laid out and ineffectively enforced. The government is responsible for much economic activity, and international aid to government services helps to fund a broad range of subsidies. Further gains will be needed to make Samoa an attractive destination for foreign investment.

Background

Samoa is a small South Pacific archipelago with a population of less than 200,000. Independent since 1962, it is now a multi-party democracy dominated politically by the Human Rights Protection Party (HRPP). A few politicians were found guilty of bribery in the 2011 parliamentary elections, but the HRPP remains in power. The economy is based on fishing, agriculture, and tourism. Remittances from Samoans working abroad account for about 24 percent of national income. A sizable tsunami in 2009 killed over 200 people and significantly damaged infrastructure and property. To facilitate better trade with Australia and New Zealand, Samoa officially moved west of the International Date Line in 2011.

The Finance Minister was forced to resign in 2014 over alleged mismanagement of government finances. The judiciary is independent and upholds the right to a fair trial, but a well-functioning legal framework for land ownership and enforcement of property rights is not firmly in place. More than 80 percent of the land is owned by extended families represented by their chiefs.

The top individual and corporate income tax rates are 27 percent. Other taxes include a value-added tax and an excise tax. The overall tax burden equals 22.9 percent of the domestic economy. Public expenditures are equal to 42.2 percent of domestic production, and government debt is equivalent to approximately 58 percent of gross domestic product.

The regulatory framework generally supports entrepreneurial activity, but application of the commercial codes is not always straightforward. Completing licensing requirements takes 18 procedures and over two months on average. A well-functioning modern labor market is not fully developed, and informal labor activity remains substantial. The government increased subsidies for fuel and health care in 2014.

Samoa’s average tariff rate is 7.1 percent. Foreign investment in several sectors of the economy is capped. The small financial sector is rudimentary. Despite some progress, scarce access to banking and financial services continues to keep much of the population outside of the formal banking sector. Reflecting the lack of financial efficiency and depth, capital markets are poorly developed.